Definition: The Matching Principle states that all expenses must be matched in the same accounting period as the revenues they helped to earn.
In practice, matching is a combination of accrual accounting and the revenue recognition principle. Both determine the accounting period in which revenues and expenses are recognized.
One of the basic accounting principles; it is followed to create a consistency in the income statements, balance sheets, etc.
Financial statements may be greatly distorted if expenses are recognized earlier rather than later and vice versa; jeapordizing the quality of the statements and providing an unfair representation of the financial position of the business.
For example:
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